by Kirk Mauriello, CEO of Profit Cookers
Virtual brands. Chances are that not only have you heard of the concept but you’re getting calls from sales reps weekly to add them to your business. It only makes sense as virtual brands are the fastest rising, hottest profit driver to hit the restaurant industry in decades. But, there’s a lot to know before you sign on.
The virtual brands model we use today made its market debut in 2019 as a way to monetize excess restaurant kitchen capacity – creating new sales using the same staff and operations. An ingenious concept we all assumed was poised to be big one day. But, then the COVID pandemic hit in 2020 and suddenly taking those calls from virtual brand sales reps was a must. Restaurant owners urgently needed more revenue, while at the same time, pandemic restrictions relegated consumers to ordering online for delivery. The convergence of these forces accelerated the virtual restaurant brand business by about five years in the space of one.
The original business model had now changed. Almost every restaurant in the country that was surviving had excess kitchen capacity. The virtual restaurant brand business was booming! And anytime you have meteoric growth, you also have many new market entrants, some with industry experience and many without. This sea of start-ups was looking for restaurant partners to fulfill, presenting them with numerous options and selling them on increased profits. It was like the pressure to just be up and running was too high to properly evaluate these new “life preserver” opportunities. Every restaurant was trying to get any revenue they could with any brands or virtual brand companies they could find. But, not all of these fast-made agreements worked out and restaurant owners began dropping those virtual brand companies that didn’t meet their value and profit expectations.
Fast forward to today. The pandemic restrictions have faded. Restaurants are now operating as normal with guests dining in and a focus on their brands. But, the business model of a restaurant has changed: 1) Off-premise sales are a larger part of a restaurant’s business, 2) Consumers have new habits on how they eat, and 3) Online delivery orders continue to be a much larger percentage of the market than before the pandemic.
Where does that leave the virtual brands industry? Restaurants should still be looking to expand their operations with virtual brands, but not because they have extra capacity. Because it is the new business model you must follow to succeed today. The challenge becomes navigating the large number of virtual brand companies and brand choices to choose the best one to fulfill for this part of your restaurant’s new business model.
There are nine essential categories any restaurant must explore to make the right (and by right, I mean money-making) choice. Let’s start here with the questions to ask that sales person when you inevitably get the call to partner and begin making their food:
- Attrition. What is your attrition rate? How many restaurants have ended their agreements with your company in the last six months? If the answer is more than 20 percent, it is indicative of one of two things (or both). The virtual restaurant brands are interfering with your current restaurant kitchen operations or you’re not receiving profitability above 30 percent which is not a good pricing model.
- Order Pricing. Does your model allow for my restaurant to have any say in pricing? If not, end the call right there. No one knows your business and pricing for profitability better than you. Only you sell in your market every day.
- Extra Costs. Do your brands require special packaging, logo packaging or stickers? If they do, you could be stuck with additional costs that will affect your profitability. More than materials, it’s also training staff and storing such packaging. All costs matter.
- Margins. Does your company provide a cost and pricing guide I can review to determine my margins for each menu item? If not, ask the rep to call back when they have details so you can make an informed decision on whether the work is worth doing. Profit matters. Just doing work is not making you money.
- Profit Split. Will my restaurant make more on each sale than your company does? If you don’t make the larger share, you’re just making them (and not you) money.
- Customization. Are your brand menus customizable to work for my restaurant? Every restaurant is unique and must be able to customize menus to their operations and inventory. Waste can be a massive unforeseen cost.
- Prep Time. Do I need to spend time prepping items thereby increasing my payroll? You don’t want brands that require a large amount of prep time. It’s a cost and all costs matter. Any time spent prepping food is time your employees are not spending producing revenue.
- Pay Schedule. Do you pay my restaurant share on a weekly basis? Do not accept no. Every virtual brand company gets paid the same way you do as an independent restaurant brand from the big three delivery services. Weekly payments are a must.
- Sales Reports. Do I receive reports for the sales/orders my restaurant has fulfilled? Do the reports have all details broken down by brand and delivery service? You need a virtual brand company that gives you proper reporting. It is essential to have the ability to audit the payments you receive.
Virtual brands can add a healthy boost to a restaurant’s bottom line. But the industry is still in its infancy and like the Wild West. Even so, that doesn’t mean there aren’t standards that should be followed. The questions outlined above speak to such important standards. And reputable virtual brands should be able to give you the right answers. Going through this type of vetting process is essential because it educates you to make the best decision on which companies and brands are the optimal fit for your business.
About the author
Kirk Mauriello is the CEO of Virtual Profit Cookers, LLC dba Profit Cookers. Kirk has been in the virtual brand business since 2019. More than 50% of his restaurant partners have been with him for over a year, and many over two years. If you would like more information on becoming a Profit Cookers fulfillment partner or want to learn more about how Profit Cookers can change and expand your restaurant’s profitability, reach out to [email protected] or 701- 314-4849 or visit www.profitcookers.com.
About Profit Cookers
Profit Cookers is a virtual restaurant brand company that partners with local, independently owned restaurants across the United States. Profit Cookers has a selection of over 30 brands, of which most restaurant partners choose 15+ to fulfill from their kitchens – all using a single tablet technology allowing all orders flow to the restaurant seamlessly.